THERE'S A WORD FOR THAT "TENSION." IT ALSO BEGINS WITH "T." I know that the words Deficits Don't Matter are engraved over the doorway to the American Prospect offices, so I'll put a little at risk here by pointing out that while the current deficit is entirely manageable, as Ezra says, the fiscal outlook for the next ten years is much bleaker -- an additional debt of $3.5 trillion, under current policies, even without accounting for the costs of the war. At that level, deficits certainly will matter. They are economically unsustainable, they leave no cushion to respond to a recession or other emergency, and they certainly leave very little room to push the deficit up even further to finance public investment, social spending, health care, or other goods.

Anyone who wants to argue that we should move to invest more in those public goods, without addressing in some way the medium- and long-term deficit, is implicitly arguing that this country can handle deficits of $500 billion a year or more, both economically and politically, over a sustained period. That's a hard case to make.

Therefore, when I hear John Edwards say, as Ezra quotes him, "there's a tension between our desire to eliminate the deficit and create a stronger economic foundation and eliminate some of the debt our children will inherit, there's a tension between that deficit and our need to invest and make America stronger for the 21st century," I agree that that's a more honest answer than you'll get from most Democrats. But it's not honest enough.

Because there is a tension, and the tension has a name: It's called TAXES. We face a zero-sum choice between deficit-reduction and spending, or a fight over the relative priority of spending as opposed to deficit reduction, only because revenues, even after a recent uptick, remain well below their historic levels and far, far below the level necessary to sustain the existing programs for an aging population. And we face the choice because the idea of real tax increases, beyond just letting tax cuts expire for the top 1% or those making more than $300,000, aren't on the table.

The Democrats elected in 2006, and those running for president, are promising three things: (1) Fiscal responsibility. (Which, by the way, is not merely an economic question to be rebutted with economics, but a potent symbol of the reckless short-sightedness of the Republicans.) (2) Extension of the middle-class tax cuts and reform of the Alternative Minimum Tax, which take those cuts away from the upper half of the middle class. And (3) some kind of economic populism, which involves public investment and action on health care. Those three promises are reconciliable, but they can only be reconciled with additional revenues, substantial additional revenues.

I know full well why Democrats don't want to say it. Who wants to be Walter Mondale? ("Mr. Reagan will raise taxes. So will I. He won't tell you. I just did.") But we had better hope they are thinking about it. And I'm not willing to give honesty points to Edwards just because he says "there's a tension" without using the other "T" word in the same answer. (He's much better than others in talking about taxes, as he was in 2004, but he still doesn't acknowledge the magnitude of revenues needed, and the fact that he barely mentions revenues in this long answer is telling.)

I'll have much more to say about this in an article that should be out shortly in another distinguished publication which I won't name here but whose initials are WM.

-- Mark Schmitt

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